<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [XX]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[XX] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[XX] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
<PAGE>
CUTTER
[Logo]
& BUCK
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, SEPTEMBER 26, 1997
To the Shareholders of Cutter & Buck Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Cutter &
Buck Inc. (the "Company") will be held on Friday, September 26, 1997 at 2:00
p.m. in the Ballroom of the Broadmoor Golf Club, 2340 Broadmoor East, Seattle,
Washington for the following purposes:
1. To consider and act upon a proposal to amend the Company's Restated
Articles of Incorporation to divide the Board of Directors into three
classes, each class consisting as nearly as possible of one-third of
the whole number of the Board of Directors.
2. To elect two Class I Directors, two Class II Directors and three
Class III Directors for initial terms of 1, 2 and 3 years,
respectively or, alternatively (if Proposal No. 1 should not be
approved), to elect the Directors of the Company to serve until
the 1998 Annual Meeting of Shareholders and until their
respective successors are elected and have qualified;
3. To consider and vote upon a proposal to approve the Cutter & Buck Inc.
1997 Stock Incentive Plan;
4. To ratify the appointment of independent auditors for the Company; and
5. To transact any other business which may properly come before the
meeting or any adjournment thereof.
Holders of Common Stock at the close of business on August 11, 1997 are
entitled to notice of and to vote at the meeting. Shareholders are cordially
invited to attend the meeting in person.
By Order of the Board of Directors,
Cutter & Buck, Inc.
2701 First Avenue, Suite 500
Seattle, Washington 98121 Martin J. Marks
August 25, 1997 SECRETARY
--------------------------------------------------------------------------
| IMPORTANT: Please fill in, date, sign and return the enclosed Proxy in |
| the postage-paid envelope to ensure that your shares are represented at |
| the meeting. If you attend the meeting, you may vote in person, if you |
| wish to do so, even though you have previously sent in your Proxy. |
--------------------------------------------------------------------------
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<PAGE>
CUTTER
[Logo]
& BUCK
August 25, 1997
Dear Shareholder:
The Board of Directors and management of Cutter & Buck Inc. cordially
invite you to attend the Annual Meeting of Shareholders. The meeting will be
held on Friday, September 26, 1997 at 2:00 p.m., in the Ballroom of the
Broadmoor Golf Club, 2340 Broadmoor East, Seattle, Washington. In addition to
the business items listed in the proxy statement, there will be a report on the
progress of the Company and an opportunity to ask questions of general interest
to you as a Shareholder.
YOUR VOTE IS VERY IMPORTANT. Therefore, whether or not you plan to attend
the meeting in person, please sign and return the enclosed proxy in the envelope
provided. If you attend the meeting and desire to vote in person, you may do so
even though you have previously sent a Proxy.
Sincerely,
/s/ Harvey N. Jones
Harvey N. Jones
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
3
<PAGE>
CUTTER & BUCK INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited by the Board of Directors of the Company
for use at the Annual Meeting of Shareholders to be held on September 26,
1997, and at any adjournment or adjournments thereof (the "Annual Meeting").
The Company first mailed this Proxy Statement to Shareholders on or about
August 25, 1997.
RECORD DATE AND OUTSTANDING SHARES
Only Shareholders of record on the books of the Company at the close of
business on August 11, 1997, will be entitled to notice of, and to vote at,
the Annual Meeting. On that date there were issued and outstanding 5,206,555
shares of Common Stock of the Company.
SOLICITATION AND REVOCABILITY OF PROXIES
Proxies may be solicited by officers, directors and regular supervisory
employees of the Company, none of whom will receive any additional
compensation for their services. Solicitation of proxies may be made
personally or by mail, telephone, telecopy or messenger. All costs of
solicitation of proxies will be paid by the Company.
Any Shareholder granting a proxy has the power to revoke it at any time
before it is exercised. A proxy may be revoked either by (i) filing with the
Secretary of the Company prior to the Annual Meeting, at the Company's
executive offices, either a written revocation or duly executed proxy bearing
a later date, or (ii) attending the Annual Meeting and voting in person,
regardless of whether a proxy has previously been given. Attendance at the
Annual Meeting will not revoke a Shareholder's proxy unless the Shareholder
votes in person.
QUORUM AND VOTING
Under Washington law and the Company's Restated Articles of
Incorporation, a quorum consisting of a majority of the outstanding shares
entitled to vote must be represented in person or by proxy to elect directors
and to transact any other business that may properly come before the meeting.
The affirmative vote of a majority of the outstanding shares entitled to
vote will be necessary to approve the proposal to amend the Company's
Restated Articles of Incorporation. Abstention from voting broker nonvotes
will have the effect of voting against the proposal. In the election of
directors, the nominees elected are the three or, alternatively (if Proposal
No. 1 should not be approved), the seven individuals receiving the greatest
number of votes cast by the shares present in person or represented by proxy
and entitled to vote. Any action other than a vote for a nominee will have
the effect of voting against the nominee. The Cutter & Buck 1997 Stock
Incentive Plan will be approved if the votes cast in favor of the Proposal
exceed the votes cast
<PAGE>
against it. Abstention from voting or broker nonvotes will have no effect
since such actions do not represent votes cast.
If the accompanying Proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the instructions given. In
the absence of instructions to the contrary, the shares will be voted in
accordance with the Board of Directors' recommendations. The Company is not
aware, as of the date hereof, of any matters to be voted upon at the Annual
Meeting other than those described in this Proxy Statement and the accompanying
Notice of Annual Meeting of Shareholders.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 11, 1997, certain
information with respect to the beneficial ownership of the Company's Common
Stock by: (i) each person known by the Company to own beneficially more than
5% of the Common Stock, (ii) each of the Company's directors, (iii) certain
of the Company's executive officers, and (iv) all directors and executive
officers as a group. Except as otherwise noted, the named beneficial owner
has sole voting and investment power.
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OWNED OF CLASS
---------------- ------------ ----------
Frances M. Conley (1) . . . . . . . . . . . 528,819 10.2%
Roanoke Investors' Limited Partnership
c/o Roanoke Capital, Ltd.
1111 Third Avenue, Suite 2220
Seattle, WA 98101
Harvey N. Jones (2) . . . . . . . . . . . . 242,722 4.7%
Martin J. Marks (3) . . . . . . . . . . . . 86,006 1.7%
Michael S. Brownfield (4) . . . . . . . . . 58,125 1.1%
Jim C. McGehee (3). . . . . . . . . . . . . 40,752 *
Patricia A. Nugent (3). . . . . . . . . . . 26,783 *
Larry C. Mounger (5). . . . . . . . . . . . 23,313 *
James B. Slayden (3). . . . . . . . . . . . 14,872 *
James C. Towne. . . . . . . . . . . . . . . 3,000 *
All directors and executive officers
as a group (13 persons) (6) . . . . . . . . 1,056,009 20.3%
- -------------
* Less than one percent
(1) 506,195 of these shares are held of record by Roanoke Investors' Limited
Partnership ("Roanoke"). Ms. Conley, a director of the Company, is a
shareholder, director and principal of Roanoke Capital Ltd. ("Roanoke
Capital"), the general partner of Roanoke. The only other shareholder,
director and principal of Roanoke Capital is Gerald R. Conley, Ms. Conley's
husband. Ms. Conley disclaims beneficial ownership of the shares held by
Roanoke that exceed her interest in Roanoke Capital's interest in Roanoke.
Includes 4,624 shares issuable upon exercise of options exercisable within
60 days of August 11, 1997.
(2) Includes 53,753 shares issuable upon exercise of options exercisable within
60 days of August 11, 1997. Excludes 3,000 shares held by the Jones-
Iannucci Educational Trust, of which Mr. Jones' children are the sole
beneficiaries.
3
<PAGE>
(3) Represents shares issuable upon exercise of options exercisable within 60
days of August 11, 1997.
(4) Excludes 32,141 shares held by the Brownfield 1991 Irrevocable Trust, of
which Mr. Brownfield's adult children are the sole beneficiaries. Includes
4,624 shares issuable upon exercise of options exercisable within 60 days
of August 11, 1997.
(5) Includes 13,872 shares issuable upon exercise of options exercisable within
60 days of August 11, 1997.
(6) Includes 255,598 shares issuable upon exercise of options exercisable
within 60 days of August 11, 1997.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Harvey N. Jones 46 Chairman and Chief Executive
Officer
Martin J. Marks 48 President, Chief Operating Officer,
Treasurer and Secretary
Jim C. McGehee 47 Vice President of Sales
Patricia A. Nugent 43 Vice President of Merchandise and
Design
Jon P. Runkel 40 Vice President of Production
Philip C. Davis 39 Vice President of Operations
Neil D. Johnson 41 Controller
Philip B. Jones 44 Vice President of International/
Managing Director of Cutter &
Buck (Europe) B.V.
In addition, the Board of Directors has also elected Stephen S. Lowber as
Chief Financial Officer of the Company as of September 1, 1997. From March,
1990 to July, 1997, Mr. Lowber was Vice President and Chief Financial Officer of
Advanced Digital Information Corporation, a technology company, and from June
1984 to February 1990, he was Vice President and Chief Financial Officer of
Zytec, Inc., a plastic products manufacturing company. From 1978 to 1984, Mr.
Lowber was an audit and senior manager with Ernst & Whinney (n/k/a Ernst & Young
LLP). Mr. Lowber has a bachelor's degree in finance from Western Washington
University, and a master's degree in business administration from Seattle
University, and is a certified public accountant.
The biographies of the current executive officers of the Company who are
not directors are as follows:
4
<PAGE>
MR. MCGEHEE, Vice President of Sales of the Company, joined the Company in
February 1990. Mr. McGehee has a bachelor's degree in business (marketing) from
Auburn University.
MS. NUGENT, Vice President of Merchandise and Design of the Company, joined
the Company in December 1993 and served as Vice President of Production from
April 1994 to May 1995. From 1983 to 1993, she was a private consultant to
various clothing and textile firms, including Demetre Inc., a sweater company,
and Roffe Inc., a skiwear company. Ms. Nugent has a bachelor's degree in
clothing and textile design from the University of Washington and a design
certificate from the Modeschule der Stadt Wien in Vienna, Austria.
MR. RUNKEL, Vice President of Production of the Company, joined the Company
in April 1995 and served as Operations Manager from April 1995 to June 1995.
From October 1994 to April 1995, he was a production manager of Organik
Technologies, Inc., an apparel manufacturer, producing contract work for such
names as Patagonia, Eddie Bauer, Timberland and Jantzen, and from March 1993 to
September 1994, he was a consultant on operations/production for Susan Barry
Designs, a women's "bridge" line, consulting in such areas as distribution,
sample making, contract management, finance and sales. Prior to that, he was a
private manufacturer and consultant to the apparel industry.
MR. DAVIS, Vice President of Operations, joined the Company in January
1997. From 1987 to 1996, he was President of Stusser Electric, an electrical
parts distribution company. Mr. Davis has a bachelor's degree in economics from
Stanford University.
MR. JOHNSON, Controller of the Company, joined the Company in December
1994. From 1987 to 1994, he was Controller of Union Bay Clothing Company.
Mr. Johnson has a bachelor's degree in business administration (accounting)
from the University of Washington and is a certified public accountant.
MR. PHILIP JONES, Vice President of International / Managing Director of
Cutter & Buck (Europe) B.V., joined the Company July 1, 1997. Since 1989,
Mr. Jones has been an independent international trade consultant serving
certain major U.S. companies, and from 1983 to 1988, he was a senior
legislative assistant to United States Senator Daniel J. Evans. Mr. Jones
holds a bachelor's degree in East Asian studies from Harvard University.
Officers serve at the discretion of the Board of Directors.
5
<PAGE>
TRANSACTIONS WITH MANAGEMENT
On May 12, 1995, Michael S. Brownfield, a director of the Company, and the
Brownfield 1991 Irrevocable Trust, of which Mr. Brownfield's adult children are
the sole beneficiaries, purchased securities in an offering of the Company for
$109,600 and $109,403, respectively. The purchases were at the same price per
share available to other investors in the offering.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation
paid or accrued to the Company's Chairman and Chief Executive Officer and the
other officers of the Company who earned salary and bonus of at least $100,000
(the "Named Executive Officers") for services rendered to the Company in all
capacities during the fiscal year ended April 30, 1997:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ------------
SECURITIES ALL OTHER
BONUS UNDERLYING COMPENSATION
NAMES AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) ($)(1) OPTIONS (#) ($)(2)
- -------------------------------------- ----------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Harvey N. Jones 1997 $170,000 $7,500 -0- $492
Chairman and Chief Executive Officer 1996 $120,000 -0- 30,000 $552
Martin J. Marks 1997 $150,000 $7,500 -0- $492
President, Chief Operating 1996 $110,000 -0- 25,000 $552
Officer, Treasurer and Secretary
Jim C. McGehee 1997 $110,000 $101,922 -0- $492
Vice President of Sales 1996 $110,000 $20,774 15,000 $552
Patricia A. Nugent 1997 $103,000 $7,500 -0- $492
Vice President of Merchandise 1996 $95,000 -0- 10,000 $552
and Design
- -----------
</TABLE>
(1) Bonus amounts received by Mr. McGehee represent sales commissions.
(2) Represents term life insurance premiums.
OPTION EXERCISES IN FISCAL 1997 AND AGGREGATE FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information as of August 11, 1997
regarding options held by each of the Named Executive Officers:
6
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
ACQUIRED ON DOLLAR VALUE UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL YEAR
NAMES EXERCISE (#) REALIZED ($) YEAR END (#)(1) END ($)(2)
- ----- ------------ ------------ ----------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Harvey N. Jones 0 N/A 42,189 34,064 $350,653 $141,884
Martin J. Marks 3,500 $30,940 68,661 36,095 $621,937 $194,112
Jim C. McGehee 0 N/A 33,236 18,766 $294,771 $88,005
Patricia A. Nugent 0 N/A 20,423 15,016 $173,490 $77,356
- -------------
</TABLE>
(1) The options listed are nonqualified stock options granted under the
Company's 1991 and 1995 Stock Option Plans. The exercise price of each
option is equal to the fair market value of the underlying Common Stock on
the date of grant. To the extent not already vested, the options generally
become fully vested and exercisable upon a change in control of the
Company.
(2) Based on the closing price of the Company's Common Stock as quoted on the
Nasdaq National Market on April 30, 1997 ($12.00), less the exercise
price. The actual value realized may be greater or less than the potential
realizable values set forth in the table.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of three nonemployee directors.
The Committee is responsible for establishing and administering the Company's
policies that govern compensation and benefit practices for employees of the
Company and its subsidiaries. The Committee also evaluates the performance of
the executive officers of the Company and its subsidiaries for purposes of
determining their base salaries, cash-based and equity-based incentives and
related benefits.
COMPENSATION GOALS
The goals of the compensation program are to align the interests of
executive management with the long-term interests of Shareholders and to
motivate Company executives to achieve the strategic business goals of the
Company. The compensation program is designed to recognize the contributions
of the executive officers, and to provide compensation opportunities which
are competitive with those offered by competitors in the men's sportswear
industry. In furtherance of these goals, the Company's compensation package
for its officers includes both short-term and long-term features in the form
of base salary, cash-based incentives keyed to Company performance and
equity-based incentives in the form of stock options which are granted
periodically at the discretion of the Committee.
BASE SALARIES
Base salaries for all officers are reviewed annually. In evaluating
salaries, the Committee uses compensation surveys pertaining to companies within
the fashion industry of similar size, and
7
<PAGE>
considers the officer's individual performance during the prior year. In
determining how the respective officer contributes to the Company, the
Committee considers current corporate performance, including sales growth,
market position and increased brand identity, as well as the potential for
future performance gains. The Committee has neither set targets related to
these factors nor has it attributed any specific weight to them for purposes
of determining base salaries.
CASH-BASED INCENTIVES
The Vice President of Sales has a cash-based incentive arrangement
dependent on actual sales in relation to pre-established yearly goals.
Although there is no formal bonus plan for the Company's other executive
officers, the Committee, in its discretion, may grant bonuses to those
executive officers from time to time. For fiscal 1997, each of the Company's
executive officers, with the exception of the Vice President of Sales, was
granted a modest bonus of $7,500. The Committee is currently considering the
adoption of a plan or other cash incentive arrangements for those officers.
EQUITY-BASED INCENTIVES
The Company has provided its executive officers with long-term
incentives through the 1991 and 1995 Stock Option Plans and, if approved by
the Company's shareholders, will continue to do so through the Cutter & Buck
1997 Stock Incentive Plan. The primary objective of these plans is to
provide the Company's executive officer participants with an incentive for
them to make decisions and take actions which maximize long-term shareholder
value. The plans are designed to promote this long-term focus by using
discretionary grants of stock options and long-term vesting periods. The
Committee favors annual or semi-annual option grants to ensure that
participants always have at least a portion of their options unvested. The
Committee believes this practice promotes motivation and retention of key
personnel.
Subject to the terms of the plans, the Committee determines the terms
and conditions of options, including the exercise price. It has been the
practice of the Committee to grant options with an exercise price equal to
the closing bid price of the Company's Common Stock as reported on the Nasdaq
National Market as of the date of grant. Prior to and in connection with the
Company's initial public offering in July 1995, the Committee accelerated the
then-outstanding unvested stock option awards by revising the existing
vesting schedules such that 50% of the options would vest on the first
anniversary of the original date of grant and 25% would vest on each of the
second and third anniversaries thereafter, as long as the optionee remained
in the employ of the Company. Option awards granted subsequent to the
Company's initial public offering generally vest in four equal annual
installments beginning one year from date of grant. The Committee believes
that stock options provide an incentive for executive officers, allowing the
Company to attract and retain high quality management.
If approved, the Cutter & Buck 1997 Stock Incentive Plan also would
allow the Company to grant Company stock directly to officers and employees
of the Company and its subsidiaries. The Committee believes it would be able
to structure grants of restricted stock that would vest only upon the
achievement of certain targets that would be based on performance criteria
aligned with
8
<PAGE>
the individual's area of responsibility, such as various combinations of
increases in the Company's stock price, net profit, gross margin, sales and
customer base as well as other measures such as inventory turn and expense
control.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
In assembling the Chairman and Chief Executive Officer's compensation
package, the Committee pursues the same objectives which apply for the Company's
other executive officers. Although the Committee's overall goal is to set the
Chairman and Chief Executive Officer's salary at the median base for competitors
which are similar in industry size and performance, the actual level approved by
the Committee may be higher or lower based upon the Committee's subjective
evaluation of the annual and long-term performance of the Company, the
individual performance of the Chairman and Chief Executive Officer, and the cash
resources and needs of the Company. Reflecting that, the increase in Mr. Jones'
salary for fiscal 1997 was due to his significant contributions in strengthening
the company's market expansion, brand identity, sales growth and overall
performance. Mr. Jones' salary for fiscal 1998 is currently being paid at an
annual rate of $213,000.
June 11, 1997 COMPENSATION COMMITTEE
Larry C. Mounger (Chair)
Frances M. Conley
James B. Slayden
STOCK PRICE PERFORMANCE
The following graph compares the cumulative total return of Company
Common Stock, the Nasdaq Stock Market -- U.S. Index and the Nasdaq
Non-Financial Index. The cumulative total return of Company Common stock
assumes $100 invested on August 15, 1995 in Cutter & Buck Inc. Common Stock
and assumes reinvestment of dividends.
Aug 15, April 30, April 30,
COMPANY 1995 1996 1997
CUTTER & BUCK INC 100.00 152.38 152.38
PEER GROUP 100.00 117.39 119.34
BROAD MARKET 100.00 117.37 124.34
PROPOSAL NO. 1 - AMENDMENTS TO RESTATED
ARTICLES OF INCORPORATION
GENERAL
The Board of Directors has unanimously approved certain amendments to the
Restated Articles of Incorporation and has directed that they be submitted to a
vote of the shareholders at the Annual Meeting. Inasmuch as the Board deems
such amendments to be interrelated in purpose and effect, they are being
submitted as a single proposal to be voted upon. To be adopted, the proposed
amendments require the affirmative vote of holders of a majority of all
outstanding shares of Common Stock of the Company entitled to vote thereon at
the Annual Meeting. Management believes it to be in the best interests of the
Company to amend the Restated Articles of Incorporation to give effect to the
proposed amendments.
The proposed amendments would, among other things:
(1) divide the Company's Board of Directors into three classes;
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<PAGE>
(2) provide that, unless certain conditions are met, the proposed
amendments may not be further amended or repealed without a vote of 75% of
the Company's shareholders.
The principal purposes of the proposed amendments are to promote
continuity and stability in the Company's leadership and policies and to
encourage any persons who might wish to acquire the Company to negotiate with
its management rather than to attempt to effect certain types of business
combinations without the approval of management or of a substantial portion
of the Company's shareholders. The proposed amendments may be considered
"anti-takeover" in nature and the effect of such amendments may be to render
more difficult or to discourage a merger or tender offer, even if such
transaction is favorable to the interests of the shareholders, or the
assumption of control by a holder of a large block of the Company's shares
and the removal of incumbent management, even if such removal would be
beneficial to shareholders.
Shareholders should note that the proposed amendments may discourage
tender offers and other non-open market acquisitions made at prices above the
prevailing market price of the Company's stock and acquisitions of stock by
persons attempting to acquire control through market purchases that may cause
the market price of the stock to reach levels that are higher than would
otherwise be the case. Discouragement of such acquisitions may have the
effect of depriving shareholders of opportunities to sell their stock at a
premium under such circumstances.
The Board of Directors has no knowledge of any efforts by any person to
obtain control of the Company or to change its management. However, in view
of the number of hostile tender offers and proxy contests experienced by
public companies, the Board of Directors believes that it is prudent and in
the interest of the shareholders to adopt the proposed amendments. The Board
of Directors has further concluded that it is desirable to consider these
proposed amendments at a time when the Company is not subject to a takeover
attempt.
CURRENT PROVISIONS OF RESTATED ARTICLES OF INCORPORATION AND BY-LAWS
The Company does not believe that its Restated Articles of Incorporation
and Bylaws as presently constituted contain any provisions which are intended
to have an anti-takeover effect. However, under the Articles of
Incorporation 18,980,479 shares of Common Stock and 6,000,000 shares of
preferred stock remain authorized and not reserved for any purpose and are
available for issuance. Although these shares were authorized to allow the
Board of Directors, without further shareholder approval, to issue additional
shares of the Company's capital stock to raise capital or to effect potential
acquisitions in the future, the authorization of such additional shares could
potentially be issued in such manner as to hamper the efforts of persons who
might attempt to gain control of the Company. Also, Article 4.1.2 of the
Restated Articles specifically provides that the Board has the authority to
create the special terms and conditions of the preferred stock which it
issues. The Board is authorized to establish the number of shares of
preferred stock to be issued in any series it decides to issue and to fix the
voting powers, designations, preferences and relative, participating,
optional or other special rights of the preferred stock, including voting
rights and conversion rights, and the qualifications, limitations and
restrictions thereon. Accordingly, it is possible for the Board to seek to
authorize the issuance of a series of preferred stock with rights and
preferences that could affect an attempt to acquire control of the Company.
For example, such
10
<PAGE>
additional authorized shares could potentially be issued to dilute the stock
ownership of persons seeking to obtain control of the Company, or shares of
preferred stock with favorable voting rights, such as the right to elect
certain additional directors, or to provide the holders of other special
rights could be created and issued to parties that support the management of
the Company.
The proposed amendments, combined with the power of the Board of
Directors to issue shares of authorized preferred stock, may have the effect
of maintaining the continuity of management and may make changes in
management more difficult, even if a majority of shareholders might consider
such changes advisable.
Cumulative voting for the election of directors is not permitted under
the Restated Articles of Incorporation, as now in effect and as proposed to
be amended.
The following sections set forth an explanation of the proposed
amendments, which are set forth in their entirety in Exhibit A to this Proxy
Statement.
CLASSIFICATION OF BOARD OF DIRECTORS
SUMMARY
The Company's Bylaws currently provide for a Board of Directors
consisting of seven members. Directors are elected to serve until the next
annual meeting of shareholders and until their respective successors are duly
elected and have qualified. The terms of all of the Company's Directors will
expire at the Annual Meeting.
Proposal No. 1 would amend Article 9 of the Restated Articles of
Incorporation to divide the Board of Directors into three classes, labeled
Class I, Class II and Class III, each containing, insofar as possible, an
equal number of directors, with the term of one of the three classes expiring
each year at the Company's annual meeting or special meeting in lieu thereof.
The Company's Directors unanimously recommended the proposed amendments to
the Company's shareholders on July 14, 1997.
The exact number of directors, and the number of members of each class
of directors, would be fixed or changed from time to time within such limits
by resolution of the Board of Directors. The provisions of the proposed
Article 9 would not apply to any director elected by holders of a class or
series of the Company's preferred stock at any time such holders might have a
right to vote separately as a class for the election of directors.
If the proposed amendment is approved, the Company will designate
nominees for each of the three classes of Directors as set forth in Proposal
No. 2. The Class I Directors would serve initially for a one-year term,
until the 1998 annual meeting of shareholders and until successors are duly
elected and have qualified, and thereafter be elected for three-year terms.
The Class II Directors would serve initially for a two-year term, until the
1999 annual meeting of shareholders and until successors are duly elected and
qualified, and thereafter be elected for three-year terms. The Class III
Directors would immediately commence service for a three-year term, and serve
until
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the 2000 annual meeting of shareholders and until their respective successors
are duly elected and have qualified. The proposed amendment provides that
any vacancy on the Board of Directors resulting from an increase in the
number of Directors may be filled by the affirmative vote of a majority of
the Directors then in office, and any other vacancy on the Board of Directors
may be filled by the affirmative vote of a majority of the Directors then in
office, although less than a quorum, or by a sole remaining Director. Any
Director elected to fill a vacancy not resulting from an increase in the
number of Directors would serve for a term equivalent to the remaining
unserved portion of the term of such newly elected Director's predecessor.
Under Washington law, the holders of a majority of a corporation's
outstanding shares may remove directors with or without cause unless such
power of removal is limited by the corporation's articles of incorporation.
The Restated Articles of Incorporation presently contain no provision
limiting such power. Such law also provides that if a corporation's articles
of incorporation provides for classification of directors, directors may be
removed only for cause unless otherwise set forth in the articles of
incorporation. Cause is not defined under Washington law for this purpose.
The Board intends, upon the adoption of the proposed amendment by the
shareholders, to amend the Company's Bylaws to provide that incumbent
Directors may be removed by a majority of shareholders only for "Cause."
"Cause," for the purposes of the proposed Bylaw provision, is defined as (a)
willful and continued material failure, refusal or inability to perform one's
duties to the Company or the willful engaging in gross misconduct materially
and demonstrably damaging to the Company; or (b) conviction for any crime
involving moral turpitude or any other illegal act that materially and
adversely reflects upon the business, affairs or reputation of the Company or
on one's ability to perform one's duties to the Company.
The vote of holders of record of a majority of the outstanding Common
Stock entitled to vote thereon at the Annual Meeting is required for adoption
of the proposed amendment.
REASONS FOR AND EFFECTS OF PROPOSED ARTICLE 9
Designation of a classified board of directors is permitted under
Section 23B.08.060 of the Revised Code of Washington. Section 23B.08.060
provides that a corporation may divide its board into one, two or three
classes, with (in the case of a board divided into three classes) the classes
serving for staggered three-year terms, so that only the directors of one
class stand for re-election in any given year.
The proposal to adopt a classified Board of Directors is not the result
of management's knowledge of any specific effort to accumulate the Company's
securities or to obtain control of the Company through a merger, tender
offer, consent solicitation or otherwise. The Board of Directors believes
that the adoption of proposed Article 9 will enhance the likelihood of
continuity and stability in the composition of the Company' s Board of
Directors and in the policies formulated by the Board, in that only about
one-third of the Board of Directors would be subject to election each year.
Staggered terms would also guarantee that, except in the unusual
circumstances of the death or resignation of Directors, approximately
two-thirds of the Directors, or more, at any one time would have at least one
year's experience as Directors of the Company.
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The proposed Article 9 will also restrict the ability of shareholders of
the Company to change the composition of the Board of Directors by extending
the time required to elect a majority of Directors from one to two years.
Thus, the existence of a classified Board may have an anti-takeover effect
because a person who has gained voting control of the Company will be unable
to gain immediate control of the Board of Directors unless he or she can
obtain sufficient votes to amend proposed Article 9 pursuant to the
requirements for such an amendment as set forth therein. See "Supermajority
Requirements for Amendment of the Proposed Amendments" below.
Adoption of the proposed amendment would thus tend to make more
difficult, or discourage, any attempt to remove current management of the
Company by means of a merger, a tender offer for the Company's stock, a proxy
contest or any other transaction resulting in a change in control, even where
such an action would be favorable to the Company's shareholders or was
supported by a majority of the shareholders. The proposed amendment would
also make it more difficult for the Company's shareholders to change the
composition of the Board and the Company's management, even for reasons of
performance of the present Board and management. The provisions of the
proposed Article 9 would be applicable to every election of Directors and not
just elections occurring in connection with a specified event such as a
hostile tender offer.
SUPERMAJORITY REQUIRED TO REPEAL PROPOSED AMENDMENTS
Under Washington law, amendments to the Restated Articles of
Incorporation may be made with the approval of holders of majority of the
Company's outstanding Common Stock, since the Restated Articles of
Incorporation do not currently provide otherwise.
The proposed amendment related to a staggered board would also provide
that any further amendment to the Restated Articles of Incorporation that
would amend, alter or repeal the amendment would require the vote of the
holders of seventy-five percent (75%) of all shares of stock of the Company
entitled to vote at a meeting held for the purpose of voting on the further
amendment. The 75% requirement would not apply in the case of an amendment
recommended to the shareholders pursuant to a resolution of the Board of
Directors approved by two-thirds of the "Continuing Directors." "Continuing
Directors," for the purposes of the proposed amendment, are (i) Directors of
the Company who are or become Directors on the date on which the proposed
amendment is adopted by the shareholders, or (ii) any Director elected by a
majority of the Continuing Directors then in office to succeed any Director
to fill any vacancy on the Board of Directors. This "supermajority"
requirement is designed to prevent the circumvention of the proposed
amendment described in this Proxy Statement by any person or persons holding
more than 50% but less than 75% of the voting stock.
THE BOARD DEEMS EACH OF THE PROPOSED AMENDMENTS TO THE RESTATED ARTICLES OF
INCORPORATION TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE FOR THE ADOPTION
OF THE PROPOSED AMENDMENTS.
PROPOSAL NO. 2 - ELECTION OF DIRECTORS
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At the Annual Meeting, seven Directors will be elected. The Board has
nominated Larry C. Mounger and Frances M. Conley for election as Class I
Directors, to serve until the Company's 1998 annual meeting of shareholders or
special meeting in lieu thereof, and until his or her successor is duly elected
and has qualified. The Board has also nominated Harvey N. Jones and Michael S.
Brownfield for election as Class II Directors, to serve until the Company's 1999
annual meeting of shareholders or special meeting in lieu thereof, and until his
successor is duly elected and has qualified, and each of James B. Slayden, James
C. Towne and Martin J. Marks for election as Class III Directors, to serve until
the Company's 2000 annual meeting of shareholders or special meeting in lieu
thereof, and until their respective successors are duly elected and have
qualified. Each of the nominees presently serves as a Director of the Company.
Information relating to each of the nominees for election as a Director is set
forth below.
In case Proposal No. 1 to amend the Restated Articles of Incorporation
to provide for three classes of Directors should not be approved by the
shareholders, the Board has, in the alternative, nominated Larry C. Mounger,
Frances M. Conley, Harvey N. Jones, Michael S. Brownfield, James B. Slayden,
James C. Towne and Martin J. Marks for election as Directors, to serve until
the next annual meeting of shareholders and until their respective successors
shall have been elected and qualified.
The nominees have agreed to serve as Directors if elected, and the
Company has no reason to believe that they will be unable to serve. In the
event that any of them is unable or declines to serve as a Director at the
time of the Annual Meeting, proxies may be voted for such other nominee as is
then designated by the Board.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF LARRY C.
MOUNGER AND FRANCES M. CONLEY AS CLASS I DIRECTORS, HARVEY N. JONES AND
MICHAEL S. BROWNFIELD AS CLASS II DIRECTORS AND JAMES B. SLAYDEN, JAMES C. TOWNE
AND MARTIN J. MARKS AS CLASS III DIRECTORS OF THE COMPANY. IN THE EVENT THAT
PROPOSAL NO. 1 IS NOT ADOPTED BY THE SHAREHOLDERS, THE BOARD UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF LARRY C. MOUNGER, FRANCES M.
CONLEY, HARVEY N. JONES, MICHAEL S. BROWNFIELD, JAMES B. SLAYDEN, JAMES C. TOWNE
AND MARTIN J. MARKS AS DIRECTORS OF THE COMPANY.
Information on the Board's nominees for directors of the Company follows:
Director Principal Occupation and Business
Name (Age) Since Experience for the Past Five Years
- -------------------------------- --------- ----------------------------------
Harvey N. Jones (46) . . . . . . 1990 Mr. Jones, a co-founder of the
Company, has been President, Chief
Executive Officer and a director of
the Company since its inception in
January 1990.
Michael S. Brownfield (57) . . . 1995 Mr. Brownfield is a private
investor. Mr. Brownfield is the
Chairman of
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Director Principal Occupation and Business
Name (Age) Since Experience for the Past Five Years
- -------------------------------- --------- ----------------------------------
Accurate Molded Plastics, a private
manufacturer of tooling and
injection molded plastics and also
serves on the boards of directors
of Heartsmart, Inc., a private
biomedical company, Northwest
Cascade, Inc., a private
construction company, Kitsap
Entertainment Corporation, a
private restaurant franchisee,
Kam-Ko Bio-Pharm Trading Co., Ltd.
Australasia, a private biomedical
company, Pantheon, Inc., a private
software integration company and
Global Tel Resources, Inc., a
private telecommunications company.
Mr. Brownfield has a bachelor's
degree in chemistry from the
University of Oregon.
Frances M. Conley (54) . . . . . 1990 Since 1982, Ms. Conley has been a
shareholder, director and principal
of Roanoke Capital, the general
partner of Roanoke, a venture
capital limited partnership.
Ms. Conley serves on the board of
directors of Data I/0, a
publicly-held provider of equipment
for programming integrated
circuits. She has a bachelor's
degree in music from Emmanuel
College and a master's degree in
business administration from the
Harvard Graduate School of Business
Administration.
Martin J. Marks (48) . . . . . . 1997 Mr. Marks, President, Chief
Operating Officer, Treasurer and
Secretary of the Company, joined
the Company as Chief Financial
Officer in January 1991. Prior to
being named President, he held the
position of Sr. Vice President.
From March 1988 to November 1990,
he was the Chief Financial Officer
of E-Machines, Inc., a developer
and manufacturer of high resolution
display systems for the Macintosh
computer. Mr. Marks has a
bachelor's degree in business
administration from Portland State
University and is a certified
public
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Director Principal Occupation and Business
Name (Age) Since Experience for the Past Five Years
- -------------------------------- --------- ----------------------------------
accountant.
Larry C. Mounger (60) . . . . . 1990 Mr. Mounger is a private investor.
From January 1993 until October
1995, Mr. Mounger was president and
chief executive officer and a
director of Sun Sportswear, a
publicly-held garment
screenprinter. From June 1963 to
January 1993, he held numerous
positions, most recently president,
chairman and chief executive
officer at Pacific Trail, Inc., an
outerwear manufacturer Mr. Mounger
currently serves on the board of
directors of Sun Sportswear;
Advanced Research Management, a
clinical research management
company; and Prepak, a distributor
of emergency preparedness packs.
He has a bachelor's degree in
business administration and a juris
doctor degree in law from the
University of Washington.
James B. Slayden (72) . . . . . 1990 Mr. Slayden has been retired since
1985. Prior to that, he held
numerous executive positions with
J.W Robinson, Marshall Field & Co.,
Bullocks and The May Company. He
has a bachelor's degree in business
administration from the University
of Washington and a master's degree
in business administration from the
University of Southern California.
James C. Towne (54) . . . . . . 1997 Mr. Towne is a private investor.
Since 1995, Mr. Towne has been
Chairman of Greenfield Development
Corporation, a remediation and
development company. From 1982 to
1995, he was president, CEO or
Chairman of various companies,
including Osteo Sciences
Corporation, Photon Kinetics, Inc.,
MCV Corporation, Metheus
Corporation and Microsoft
Corporation. From 1970 to 1982, Mr.
Towne held several positions at
Tektronix, Inc., including Vice
President and General Manager of
the Instrumentation Division.
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Director Principal Occupation and Business
Name (Age) Since Experience for the Past Five Years
- -------------------------------- --------- ----------------------------------
He has both a bachelor's degree in
economics and a master's degree in
business administration from
Stanford University.
Directors hold office until the next annual meeting of shareholders of the
Company or until their successors have been elected and qualified.
INFORMATION ON COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors maintains an Audit Committee, a Compensation
Committee and a Nominating Committee. These committees do not have formal
meeting schedules, but are required to meet at least once each year. During the
past year, there were six meetings of the Board of Directors, one meeting of
each of the Audit Committee, the Compensation Committee and the Nominating
Committee. Each director attended at least seventy-five percent (75%) of the
meetings of the Board of Directors and of the committees of which he or she is a
member.
Current members of the Audit Committee are Ms. Conley, Chair, and
Mr. Mounger and Mr. Slayden. The Audit Committee is responsible for
recommending the Company's independent auditors and reviewing the scope, costs
and results of the audit engagement.
Current members of the Compensation Committee are Mr. Mounger, Chair,
Ms. Conley and Mr. Slayden. The Compensation Committee is responsible for
determining the overall compensation levels of the Company's executive officers
and administering the Company's stock option and employee stock purchase plans.
Current members of the Nominating Committee are Mr. Brownfield, Chair,
Ms. Conley and Mr. Jones. The Nominating Committee is primarily responsible for
recommending director nominees to the Company's Board of Directors. The
Nominating Committee will consider recommendations by shareholders for vacancies
on the Board, which recommendations may be submitted to the Company's Secretary.
DIRECTOR COMPENSATION
The Company currently pays $1,000 per Board meeting attended to each
director who is not an officer or employee of the Company or an affiliate of a
venture capital firm with an interest in the Company. Directors are not
currently paid any additional amounts for attending Committee meetings. All
directors are entitled to reimbursement for expenses incurred in traveling to
and from Board meetings. In each of the last five years, Mr. Mounger and
Mr. Slayden each have been granted an option under the 1991 Plan to purchase
2,312 shares of the Company's Common Stock at an exercise price equal to the
fair market value of the Common Stock on the date of grant. In addition,
pursuant to the Director Plan, directors who are not officers, employees or
independent
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consultants of the Company are eligible to receive annual option grants to
purchase 2,312 shares of Common Stock at the fair market value of the Common
Stock on the date of grant.
PROPOSAL NO. 3: CUTTER & BUCK INC. 1997 STOCK INCENTIVE PLAN
The Company has granted stock options to its employees since 1991 under the
1991 and 1995 Stock Option Plans. These Plans have no shares left for issuance.
If approved by Shareholders, the Cutter & Buck Inc. 1997 Stock Incentive Plan
(the "Plan") would enable the Company to continue its practice of granting stock
options as one element of its compensation program. The following is a summary
of the Plan, a complete copy of which has been filed with the Commission as an
appendix to this proxy statement.
PURPOSES
The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees of the Company or any of its subsidiaries and to promote
the success of the Company's business.
SHARES SUBJECT TO PLAN
There are 350,000 shares of Common Stock authorized for nonqualified and
incentive stock option grants and for grants of restricted shares of Common
Stock under the Plan, which are subject to adjustment in the event of stock
splits, stock dividends and other situations.
PARTICIPANTS
Eligible participants in the Plan include any employee, officer, consultant
or advisor of the Company or any parent or subsidiary of the Company and are
selected by the Compensation Committee, or a subcommittee thereof (the
"Committee"). Although the Plan is broad enough to cover all employees,
officers, consultants and advisors of the Company and its subsidiaries, the
Company anticipates that approximately 30 persons would meet the parameters
currently set by the Committee for receiving benefits under the Plan. The Plan
provides that no participant may be granted in any year more than 50,000 shares
of restricted stock, or options to purchase more than 50,000 shares of Common
Stock, as adjusted as provided in the Plan.
ADMINISTRATION
The Committee shall either (i) consist solely of two or more non-employee
directors of the Company as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, or (ii) cause any director who is not a non-employee
director to abstain from any action by the Committee related to granting options
to executive officers of the Company. The Board of Directors may also appoint
one or more separate committees of the Board of Directors which may administer
the Plan with respect to employees who are not executive officers of the
Company.
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The Board of Directors may amend or terminate the Plan as desired, without
further action by the Company's shareholders, except to the extent required by
applicable law.
TERMINATION
The Plan will continue in effect until all shares of stock available for
grant have been acquired through exercise of options or otherwise, or for a term
of ten (10) years from its effective date, whichever is earlier. The Plan may be
terminated at such earlier time as the Board of Directors may determine.
Termination of the Plan will not affect the rights and obligations arising under
restricted stock or options granted under the Plan and then in effect.
TERMS OF STOCK OPTIONS
The Committee may grant incentive stock options as defined in Section 422
of the Internal Revenue Code of 1986, as amended, and non-qualified stock
options. Options granted pursuant to the Plan need not be identical but each
option is subject to certain terms and conditions of the Plan. The exercise
price under each option is established by the Committee. The exercise price may
be paid as determined by the Committee. Options granted expire within a period
of not more than ten (10) years from the grant date. Options shall be
exercisable in such manner and at such times as the Committee may determine. The
Committee may at any time prior to exercise and subject to consent of the
participant, amend, modify or cancel any option previously granted and may or
may not substitute in their place options at a different price and of a
different type under different terms or in different amounts.
TERMS OF RESTRICTED STOCK
The Committee may grant shares of restricted Common Stock of the Company
with such terms and conditions as may be determined by the Committee. Grants of
shares of restricted stock shall be made at such cost as the Committee shall
determine and may be issued for no monetary consideration, subject to applicable
state law. Shares of restricted stock shall be issued and delivered at the time
of the grant or as otherwise determined by the Committee, but shall be subject
to forfeiture until provided otherwise in the applicable restricted stock
agreement. Each certificate representing shares of restricted stock shall bear a
legend referring to the risk of forfeiture of the shares and stating that such
shares are nontransferable until all restrictions have been satisfied and the
legend has been removed. At the discretion of the Committee, the grantee may or
may not be entitled to full voting and dividend rights with respect to all
shares of restricted stock from the date of grant.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the Plan
is intended to be a summary of applicable federal law. State and local tax
consequences may differ. Because the federal income tax rules governing options
and related payments are complex and subject to frequent change, optionees are
advised to consult their tax advisors prior to exercise of options or
dispositions of stock.
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<PAGE>
Incentive stock options and non-qualified stock options are treated
differently for federal income tax purposes. Incentive stock options are
intended to comply with the requirements of Section 422 of the Code. Non-
qualified stock options need not comply with such requirements.
An optionee is not taxed on the grant or exercise of an incentive stock
option. The difference between the exercise price and the fair market value of
the shares on the exercise date will, however, be a preference item for purposes
of the alternative minimum tax. If an optionee holds the shares acquired upon
exercise of an incentive stock option for at least two years following grant and
at least one year following exercise, the optionee's gain, if any, upon a
subsequent disposition of such shares is long term capital gain. The measure of
the gain is the difference between the proceeds received on disposition and the
optionee's basis in the shares (which generally equals the exercise price). If
an optionee disposes of stock acquired pursuant to exercise of an incentive
stock option before satisfying the one and two-year holding periods described
above, the optionee will recognize both ordinary income and capital gain in the
year of disposition. The amount of the ordinary income will be the lesser of
(i) the amount realized on disposition less the optionee's adjusted basis in the
stock (usually the option price) or, (ii) the difference between the fair market
value of the stock on the exercise date and the option price. The balance of the
consideration received on such a disposition will be long-term capital gain if
the stock had been held for at least one year following exercise of the
incentive stock option. The Company is not entitled to an income tax deduction
on the grant or exercise of an incentive stock option or on the optionee's
disposition of the shares after satisfying the holding period requirement
described above. If the holding periods are not satisfied, the Company will be
entitled to a deduction in the year the optionee disposes of the shares, in an
amount equal to the ordinary income recognized by the optionee.
An optionee is not taxed on the grant of a non-qualified stock option. On
exercise, however, the optionee recognizes ordinary income equal to the
difference between the option price and the fair market value of the shares on
the date of exercise. The Company is entitled to an income tax deduction in the
year of exercise in the amount recognized by the optionee as ordinary income.
Any gain on subsequent disposition of the shares is long-term capital gain if
the shares are held for at least one year following exercise. The Company does
not receive a deduction for this gain.
A grantee of shares of restricted stock recognizes ordinary income on the
date of receipt equal to the value of such shares (less any consideration paid
by the grantee) unless the shares of stock are subject to a substantial risk of
forfeiture. If the shares of stock are subject to a substantial risk of
forfeiture, absent an election by the grantee to be taxed on the date of grant,
then the grantee will recognize ordinary income when the risk of forfeiture
lapses. The Company is entitled to an income tax deduction in the year the
grantee recognizes income equal to the amount of income recognized by grantee.
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PLAN BENEFITS
The Committee has full discretion to determine the number and amount of
options to be granted to employees under the Plan, subject to an annual
limitation on the total number of options that may be granted to any employee.
Therefore, the benefits and amounts that will be received by each of the named
executive officers, the executive officers as a group and all other employees
under the Plan are not presently determinable. Details on stock options granted
during the last two years to certain executive officers are presented in the
Summary Compensation Table.
REQUIRED APPROVAL
The Plan will be approved if the votes cast in favor of the Plan exceed the
votes cast against it. Abstention from voting or nonvoting by brokers will have
no effect since such actions do not represent votes cast by shareholders. Unless
marked to the contrary, proxies received will be voted for approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PLAN.
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, acting upon the recommendation of the Audit
Committee, has appointed Ernst & Young LLP ("Ernst & Young") as auditors of the
Company for the fiscal year ending April 30, 1998. Ernst & Young has audited
the accounts of the Company since fiscal year 1993. Representatives of Ernst &
Young are expected to attend the meeting and will have the opportunity to make a
statement and to respond to appropriate questions from Shareholders. In the
event Shareholders do not ratify the appointment by a majority of the votes
cast, represented in person or by proxy, the selection of auditors will be
reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ERNST & YOUNG AS
AUDITORS FOR THE COMPANY.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Based solely on a review of copies of reports made pursuant to Section
16(a) of the Securities Exchange Act of 1934 and the related regulations, the
Company believes that during fiscal year 1997 all filing requirements applicable
to its directors, executive directors and 10 percent shareholders were
satisfied.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no other
business which will be presented for action at the Annual Meeting. If any other
business requiring a vote of the
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Shareholders should come before the Annual Meeting, the persons designated as
your proxies will vote or refrain from voting in accordance with their best
judgment.
FUTURE SHAREHOLDER NOMINATIONS AND PROPOSALS
Nominations of persons for election to the Board of Directors may be made
at any Annual Meeting of Shareholders by any Shareholder of the Company (i) who
is a Shareholder of record on the date of the giving of the notice and on the
record date for the determination of Shareholders entitled to vote at the Annual
Meeting, and (ii) who timely complies with the notice procedures and form of
notice set forth below. To be timely, a Shareholder's notice must be given to
the Secretary of the Company and must be delivered to or mailed and received at
the principal executive offices of the Company not less than sixty (60) days nor
more than ninety (90) days prior to the anniversary date of the immediately
preceding Annual Meeting of Shareholders; PROVIDED, HOWEVER, that in the event
that the Annual Meeting is called for a date that is not within thirty (30) days
before or after the anniversary date, or no Annual Meeting was held in the
immediately preceding year, notice by the Shareholder in order to be timely must
be so received no later than the close of business on the tenth (10th) day
following the day on which the notice of the Annual Meeting date was mailed to
Shareholders or other public disclosure of the Annual Meeting date was made,
whichever first occurs. To be in proper form, a Shareholder's notice must be in
written form and must set forth (a) as to each person whom the Shareholder
proposes to nominate for election as a director (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares of
capital stock of the Company which are owned beneficially or of record by the
person, and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder, and
(b) as to the Shareholder giving the notice (i) the name and record address of
the Shareholder, (ii) the class or series and number of shares of capital stock
of the Company which are owned beneficially or by record by the Shareholder,
(iii) a description of all arrangements or understandings between the
Shareholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by the
Shareholder, (iv) a representation that the Shareholder intends to appear in
person or by proxy at the meeting to nominate the person named in its notice,
and (v) any other information relating to the Shareholder that would be required
to be disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. The notice must be accompanied by a written consent of each
proposed nominee to be named as a nominee and to serve as a director if elected.
To be included in the Company's proxy materials mailed to the Company's
Shareholders pursuant to Rule 14a-8 of the Exchange Act, Shareholder proposals
to be presented at the 1998 Annual Meeting of Shareholders must be received by
the Company at its executive offices at 2701 First Avenue, Suite 500, Seattle,
Washington 98121, to the attention of the Secretary, on or before April 27,
1997. No business may be transacted at an Annual Meeting of Shareholders, other
than
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business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the Annual Meeting by or at the direction of the Board of Directors
(or any duly authorized committee thereof), or (c) otherwise properly brought
before the Annual Meeting by any Shareholder of the Company (i) who is a
Shareholder of record on the date of the giving of the notice and on the
record date for the determination of Shareholders of record on the date for
the determination of Shareholders entitled to vote at the Annual Meeting, and
(ii) who timely complies with the notice procedures and form of notice set
forth above. To be timely, a Shareholder's notice must be given to the
Secretary of the Company and must be delivered to or mailed and received at
the principal executive offices of the Company not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the
immediately preceding Annual Meeting of Shareholders; PROVIDED, HOWEVER, that
in the event that the Annual Meeting is called for a date that is not within
thirty (30) days before or after the anniversary date, or no Annual Meeting
was held in the immediately preceding year, notice by the Shareholder in
order to be timely must be so received no later than the close of business on
the tenth (10th) day following the day on which the notice of the Annual
Meeting date was mailed to Shareholders or other public disclosure of the
Annual Meeting date was made, whichever first occurs. To be in proper form, a
Shareholder's notice must be in written form and must set forth as to each
matter the Shareholder proposes to bring before the Annual Meeting (i) a
brief description of the business desired to be brought before the Annual
Meeting and the reasons for conducting the business at the Annual Meeting,
(ii) the name and record address of the Shareholder, (iii) the class or
series and number of shares of capital stock of the Company which are owned
beneficially or of record by each Shareholder, (iv) a description of all
arrangements or understandings between the Shareholder and any other person
or persons (including their names) in connection with the proposal of the
business, and (v) a representation that the Shareholder intends to appear in
person or by proxy at the Annual Meeting to bring such business before the
meeting.
By Order of the Board of Directors
Martin J. Marks
SECRETARY
Seattle, Washington
August 25, 1997
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EXHIBIT 1
PROPOSED AMENDMENTS TO RESTATED ARTICLES OF INCORPORATION
Proposed Amendment: The Restated Articles of Incorporation of the
Company would be amended by replacing Article 9 in its entirety with the
following:
(a) (1). The business and affairs of the Corporation shall
be managed under the direction of a Board of Directors, the number
of which shall be set forth in the Bylaws of the Corporation. The
Directors shall be classified with respect to the time for which
they shall severally hold office by dividing them into three
classes, Class I, Class II and Class III, each consisting as
nearly as possible of one-third of the whole number of the Board
of Directors. All Directors shall hold office until their
successors are elected and qualified, or until their earlier
death, resignation, disqualification or removal. At the first
election of Directors following adoption of this provision by the
shareholders of the Corporation, Class I Directors shall be
elected for a term of one year; Class II Directors shall be
elected for a term of two years; and Class III Directors shall be
elected for a term of three years; and at each annual shareholders'
meeting thereafter, successors to the Directors whose terms shall expire
that year shall be elected to hold office for a term of three years, so
that the term of office of one class of Directors shall expire in each
year. Any vacancy on the Board of Directors that results from an
increase in the number of Directors may be filled by the affirmative vote
of a majority of the Directors then in office, and any other vacancy on
the Board of Directors may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, or
by a sole remaining Director. Any Director elected to fill a vacancy not
resulting from an increase in the number of Directors shall serve for a
term equivalent to the remaining unserved portion of the term of such
newly elected Director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have
the right, voting separately by class or series, to elect Directors at an
annual or special meeting of shareholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of the Articles of Incorporation applicable
thereto, and such Directors shall not be divided into classes pursuant to
this Article 9(a)(1) unless expressly provided by such terms.
(2) No amendment to the Articles of Incorporation of the
Corporation shall amend, alter or repeal any of the provisions of this
Article 9(a) unless the amendment effecting such amendment, alteration or
repeal shall receive the affirmative vote of or consent of the holders of
seventy-five percent (75%) of all shares of stock of the Corporation
entitled to vote at a
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meeting of shareholders held for the purpose of voting on such amendment,
considered for the purposes of this Article 9 as one class; provided that
this paragraph 9(a)(2) shall not apply to, and such seventy-five percent
(75%) vote shall not be required for, any such amendment recommended to
the shareholders pursuant to a resolution of the Board of Directors
approved by two-thirds of the Continuing Directors. For purposes of this
paragraph 9(a)(2), a "Continuing Director" shall mean any Director of the
Corporation who is or becomes a Director on the date that this Article 9
is first adopted by the Corporation's shareholders or any Director
elected by a majority of the Continuing Directors then in office to
succeed any Director or to fill any vacancy on the Board of Directors
whether resulting from an increase in the number of Directors or
otherwise.
PROPOSED BYLAW AMENDMENTS
The Bylaws of the Company would be amended by:
replacing Article III, Section 3 in its entirety with the following:
Section 3 TENURE AND QUALIFICATION. The directors shall be
classified with respect to the time for which they shall severally hold
office by dividing them into three classes, each consisting of one-third
of the whole number of the board of directors, and all directors shall
hold office until their successors are elected and qualified, or until
their earlier death, resignation or removal. At the first meeting held
for election of the board of directors pursuant to such classification,
directors of the first class shall be elected for a term of one year;
directors of the second class shall be elected for a term of two years;
directors of the third class shall be elected for a term of three years;
and at each annual election thereafter, successors to the directors whose
terms shall expire that year shall be elected to hold office for a term
of three years, so that the term of office of one class of directors
shall expire in each year. Directors need not be residents of the state
of Washington or shareholders of the corporation.
deleting Article III, Section 4 in its entirety.
replacing Article III, Section 7 in its entirety with the following:
Section 7 REMOVAL OF DIRECTORS. Any director or the entire board
of directors may be removed for "Cause," as hereinafter defined, by the
holders of a majority of the stock issued and outstanding and entitled to
vote at a special shareholders' meeting called for the purpose of
removing the director(s); provided, however, that the directors elected
by a particular class of shareholders may be removed only by the vote of
the holders of a majority of the shares of such class. For purposes of
this Section 7, "Cause" means:
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(A) willful and continued material failure, refusal or inability to
perform one's duties to the corporation or the willful engaging in gross
misconduct materially and demonstrably damaging to the corporation; or
(B) conviction for any crime involving moral turpitude or any other
illegal act that materially and adversely reflects upon the business,
affairs or reputation of the corporation or on one's ability to perform
one's duties to the corporation.
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APPENDIX A
CUTTER & BUCK
1997 STOCK INCENTIVE PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1997 Cutter & Buck Stock
Incentive Plan (the "Plan") are to attract and retain the best available
personnel for positions of substantial responsibility with Cutter & Buck Inc.
(the "Company"), to provide additional incentive in the form of stock options or
shares of restricted Common Stock of the Company (the "Benefits") to employees
of the Company or any parent or subsidiary of the Company which now exists or
hereafter is organized or acquired by or acquires the Company, and to promote
the success of the business.
2. ELIGIBILITY. Any employee, officer or consultant or advisor of the
Company or any parent or subsidiary of the Company may receive Benefits under
the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company, or a subcommittee thereof
(the "Committee"). The Committee shall either (i) consist solely of two or more
non-employee directors of the Company as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or (ii) cause any director who is
not a non-employee director to abstain from any action by the Committee related
to granting Benefits to executive officers of the Company. The Board of
Directors may also appoint one or more separate committees of the Board of
Directors who may administer the Plan with respect to employees who are not
executive officers of the Company.
4. EFFECTIVE DATE AND TERMINATION OF PLAN. Subject to shareholder
approval, the effective date of the Plan is July 31, 1997. The Plan shall
terminate when all shares of stock subject to Benefits granted under the Plan
shall have been acquired or on June 10, 2007, whichever is earlier, or at such
earlier time as the Board of Directors may determine. Termination of the Plan
will not affect the rights and obligations arising under Benefits granted under
the Plan and then in effect.
5. SHARES SUBJECT TO THE PLAN. The stock subject to Benefits authorized
to be granted under the Plan shall consist of 350,000 shares of the Company's
common stock, no par value, or the number and kind of shares of stock or other
securities which shall be substituted or adjusted for such shares as provided in
Section 8. All or any shares of stock subject to Benefits which for any reason
terminate may again be made subject to Benefits under the Plan.
6. GRANT, TERMS AND CONDITIONS OF OPTIONS. Incentive stock options as
defined in Section 422 of the Internal Revenue Code of 1986, as amended and non-
qualified stock options may be granted by the Committee at any time and from
time to time prior to the termination of the Plan to those employees of the
Company or any parent or subsidiary of the Company who, in the Committee's
judgment, are largely responsible through their judgment, interest, ability and
special efforts for the successful conduct of the Company's operations.
However, no participant shall be
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granted options in any year to purchase more than 50,000 shares of the
Company's common stock as adjusted as provided in Section 8.
No participant shall have any rights as a shareholder of the Company
with respect to any shares of stock underlying any option granted hereunder
until those shares have been issued. Each option shall be evidenced by a
written stock option agreement which will expressly identify the option as an
incentive stock option or as a non-qualified stock option. Furthermore, the
grant of an incentive option pursuant to the Plan shall in no way be construed
as an alternative to the right of an optionee to purchase stock pursuant to any
present or future grant of a non-qualified option under any of the Company's
current or future stock option plans. Options granted pursuant to the Plan need
not be identical but each option is subject to the terms of the Plan and is
subject to the following terms and conditions:
6.1 PRICE. The exercise price of each option granted under the Plan
shall be established by the Committee. The exercise price may be paid as
determined by the Committee.
6.2 DURATION AND EXERCISE OR TERMINATION OF OPTION. Each option
granted under the Plan shall be exercisable in such manner and at such
times as the Committee shall determine. Each option granted must expire
within a period of ten (10) years from the grant date.
6.3 TRANSFERABILITY OF OPTIONS. Each option shall be transferable
only by will or the laws of descent and distribution except and unless the
option provides for additional rights to transfer.
6.4 OTHER TERMS AND CONDITIONS. Options may also contain such other
provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate. No option, however, nor
anything contained in the Plan shall confer upon any participant any right
to continue in the Company's employ or service nor limit in any way the
Company's right to terminate his or her employment or service at any time.
7. GRANT, TERMS AND CONDITIONS OF RESTRICTED STOCK. The Committee may
grant shares of restricted common stock of the Company with such terms and
conditions as may be determined in the sole discretion of the Committee. Grants
of shares of restricted stock shall be made at such cost as the Committee shall
determine and may be issued for no monetary consideration, subject to applicable
state law. Shares of restricted stock shall be issued and delivered at the time
of the grant or as otherwise determined by the Committee, but may be subject to
forfeiture until provided otherwise in the applicable restricted stock
agreement. Each certificate representing shares of restricted stock shall bear
a legend referring to the risk of forfeiture of the shares and stating that such
shares are nontransferable until all restrictions have been satisfied and the
legend has been removed. At the discretion of the Committee, the grantee may or
may not be entitled to full voting and dividend rights with respect to all
shares of restricted stock from the date of grant. No
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participant shall be granted more than 50,000 shares of restricted stock of
the Company in any year, as adjusted as provided in Section 8.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION/CHANGE IN CONTROL. The
number and kind of shares of Company stock subject to Benefits under the Plan
shall be appropriately adjusted along with a corresponding adjustment in the
option exercise price, if applicable, to reflect any stock dividend, stock
split, split-up or any combination or exchange of shares, however accomplished.
An appropriate adjustment shall also be made with respect to the aggregate
number and kind of shares available for grant under the Plan. If the Company or
the shareholders of the Company enter into an agreement to dispose of all or
substantially all of the assets or shares by means of a sale, a reorganization,
a liquidation, or otherwise, all options shall become immediately exercisable
with respect to the full number of shares subject to those options and all
restrictions on any shares of restricted stock granted under the Plan shall be
immediately removed.
9. WITHHOLDING. To the extent required by applicable federal, state,
local or foreign law, a participant shall make arrangements satisfactory to the
Company for the satisfaction of any withholding tax obligations that arise
pursuant to Benefits granted under the Plan. The Company shall not be required
to issue shares until such obligations are satisfied. The Committee may (but
shall not be required to) permit these obligations to be satisfied by having the
Company withhold a portion of the shares of stock that otherwise would be issued
to the participant or by delivering shares previously owned by the participant.
10. AMENDMENT AND TERMINATION. The Board of Directors may amend or
terminate the Plan as desired, without further action by the Company's
shareholders, except to the extent required by applicable law.
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PROXY
CUTTER & BUCK INC.
2701 FIRST AVENUE, SUITE 500
SEATTLE, WA 98121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin J. Marks and Harvey N. Jones or
either of them, as Proxies, each with the power to appoint her or his
substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of Common Stock of Cutter & Buck Inc. held
of record by the undersigned on August 11, 1997, at the Annual Meeting of
Shareholders to be held on September 26, 1997, or any adjournment thereof.
1. AMENDMENT OF RESTATED ARTICLES OF INCORPORATION. Amend the Company's
Restated Articles of Incorporation to divide the Board of Directors into
three classes and to provide for supermajority shareholder voting to repeal
these amendments.
- - FOR - AGAINST - ABSTAIN
2. ELECTION OF DIRECTORS.
- - FOR all nominees listed below - WITHHOLD AUTHORITY to vote for all
(EXCEPT AS MARKED TO THE CONTRARY BELOW) nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name listed below.)
Harvey N. Jones, Frances M. Conley, Larry C. Mounger, Michael S. Brownfield,
James B. Slayden, James C. Towne, Martin J. Marks
3. CUTTER & BUCK 1997 STOCK INCENTIVE PLAN. Approve the Cutter & Buck 1997 Stock
Incentive Plan.
- - FOR - AGAINST - ABSTAIN
4. INDEPENDENT AUDITORS. Ratify the appointment of Ernst & Young LLP as the
Company's auditors.
- - FOR - AGAINST - ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 THROUGH 4 AND WILL BE VOTED IN ACCORDANCE WITH
THE DISCRETION OF THE PROXIES UPON ALL OTHER MATTERS WHICH MAY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF.
Dated: , 1997
----------------
------------------------------
Signature
------------------------------
Signature (if held jointly)
Please sign name as appears below.
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title. If a
corporation, please sign full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
